The Law That Lets Obama Demagogue Overtime Pay And Puts The Squeeze On Oregon Berry Farmers

George Leef
, ContributorI write on the damage big government does, especially to education.Opinions expressed by Forbes Contributors are their own.

The Fair Labor Standards Act (FLSA) was passed in 1938, one of those statist measures that FDR and his allies said were necessary to combat the Depression. It is the law that puts federal politicians and especially bureaucrats in the Department of Labor in charge of key aspects of labor contracts, including the minimum wage and mandatory overtime pay.

Lately, the FLSA has gotten itself into the news. Obama insists on raising the minimum wage from $7.25 to $10.10 per hour, but that’s rather old news. Last week, he declared that the Labor Department would revise the rules on overtime pay so that more employees would qualify for the time and a half rate if they work over 40 hours in a week. That move is nothing but election-year grandstanding meant to help keep alive the fiction that the Democrats are the party of “the little guy.”

The FLSA also got into the news with an editorial in the March 18 Wall Street Journal,“Labor’s Blueberry Police.” Back in 2012, using nothing more than a groundless and mistaken assumption about the amounts that workers could pick in an hour, the Labor Department accused several Oregon growers of violating the law. It declared the picked berries “hot cargo” which could not be shipped until the growers forked over a fine of some $240,000, paid directly to the government rather than into an escrow as had always been the practice before.

I’ll come back to the Oregon case later.

Let’s consider Obama’s gambit on overtime pay. The vaguely worded FLSA says that workers who put in more than 40 hours per week must be paid at a time and a half rate for the excess hours, but also that it doesn’t apply to managerial employees. Obama wants to have the Labor Department change the rules so that many workers who companies now deem to be managers will instead qualify for overtime pay.

Adhering to the line that ordinary workers must depend upon the federal government to save them from the unfairness of their employers, Cecilia Munoz, director of the White House Domestic Policy Council stated, “We need to fix the system so folks working hard are getting compensated fairly.”

This initiative might be good for some campaign ads touting the professed “compassion” of the Democrats, but, just as is the case with the minimum wage, there are hidden costs and trade-offs that make the effort useless if not harmful.

Suppose that the Labor Department revises its rules as Obama wants. Does it not occur to the president that employers will then make adjustments to avoid rising payroll costs? He may disdain business owners (the point of his revealing “They didn’t build that” comment) but neither he, his authoritarian Labor Secretary Thomas Perez nor anyone else can doubt that firms will compensate in various ways. The idea that this overtime change will suddenly transfer billions from corporate profits into the deserving hands of workers is silly – but the thought might keep some voters from abandoning the Democrats.

In its reporting on this, the New York Times dutifully parroted the trope that corporations are raking in vast profits while underpaying workers. That is more political misdirection. While some companies are indeed making strong profits, many others continue to struggle in the poisonous business climate the Obama administration has created.

Business isn’t a monolith and the cost of dealing with new and changing government regulations tends to hit small businesses hardest. To whatever slight extent the overtime pay rules have any bite, they will probably do so at small firms struggling to stay afloat.

The Labor Department’s offensive against the blueberry growers caused them to squander money on legal help in fighting to find out why they had been targeted and to get their money back. A judge in Oregon has ruled in favor of the growers, but the swaggering federal enforcers are appealing his ruling.

This reminds me of the way the Federal Trade Commission bullied the harmless Music Teachers National Association, which I wrote about here. Federal officials, in love with their power and able to spend enormous amounts of taxpayer dollars, do a lot of damage throughout America.

The FLSA is a law that’s prone to abuse. But I’m not only opposed to the abuse. As Edmund Burke wrote in Vindication of Natural Society, “In vain you tell me that Artificial Government is good, but that I fall out only with the Abuse. The Thing! The Thing itself is the Abuse!” That is the case with the FLSA.

The law would never have been passed under the Constitution’s division of authority between the federal government and the rest of society. Nothing in Article I, Section 8 gives Congress the power to dictate the terms of contracts. (States are forbidden from impairing the obligation of contracts in Article I, Section 10.)

Laws very similar to the FLSA were declared unconstitutional in the mid-30s. In the Schechter Poultry case in 1935, a unanimous Court declared that the National Industrial Recovery Act was invalid because it exceeded the powers of Congress by regulating business that was not “interstate commerce” and also by illegally delegating its power to the executive branch. That is exactly the same as the FLSA.

Had it not been for Roosevelt’s threat to pack the Court because he was angry that a group of “old men on the Court” chose to uphold the meaning of the Constitution rather than allow him to trample upon it, we would not have the FLSA. But his threat, while unpopular even among Democrats, worked on Chief Justice Charles Evans Hughes. Hughes formed a majority to uphold the National Labor Relations Act in 1937, simply ignoring all the precedents under which it was clearly unconstitutional. That decision, NLRB v. Jones & Laughlin Steel, opened the floodgates for legislation that put the federal government in control over almost every detail of business. If you think that’s an exaggeration, read Wickard v. Filburn.